Big Pharma Helps Advent Close New Fund

Having relationships with big pharmaceutical companies is often the key to success for life science startups. Boston-based private equity giant Advent International recently showed those relationships can help at the fund raising level as well.

Advent has closed its Health Care & Life Sciences III (HCLS III) fund with $125 million, attracting more than half the capital from pharmaceutical company AstraZeneca (NYSE: AZN), which invested $75 million, according to documents filed with the U.S. Securities and Exchange Commission. The Young Men’s Christian Association Retirement Fund invested $10 million, while the remainder came from several U.S. and European institutional investors, Advent said.

Advent’s aggregate offering price was listed as $275 million and $290 million on two of its SEC filings. The firm says its initial target was significantly below those figures but did not disclose how much it initially set out to raise. The firm’s last dedicated health care fund, Health Care & Life Sciences II, closed in 1999 with $100 million.

The firm has counted some of the most established private equity LPs among its investors throughout its 20 years. Limited partners in past Advent funds include Aetna Insurance Group, BancBoston Investments, Duke Management Co., Harvard Management Co., RJR Nabisco, the University of Michigan and Yale University.

The fund is focused on early-stage investments in biotechnology, pharmaceuticals and medical technology. HCLS III has led two investments so far: AlgoRx Pharmaceuticals’ $65 million Series C funding and Millimed Holdings’ $22 million Series A financing. AlgoRx develops drugs that treat pain and Millimed develops technologies for minimally-invasive vascular surgery.

Venture capital investments in medical and health care companies for the first half of 2004 total just under $3 billion, according to Thomson Venture Economics (publisher of PE Week). This is a significant increase from last year, where VC deals in medical and health care companies totaled just over $2 billion. Total venture investment in medical and health care companies rose from $5 billion in 2002 to $5.8 billion in 2003.